Just FYI, during the 1930s depression, many civil servants were paid with vouchers rather than cash, because local governments were unable to collect property taxes and their receipts fell into the shitbin.

i came to this country some time ago with little more than a crippling debt burden in GB Pounds and the shirt on my back. i used to have to send back $1,200 each month to pay off my UK debt, and now I'm sending back over $1,400 to cover the same amount of debt repayment. that's two and a half thousand dollars disappearing from my tiny disposable income every year, for no explicable reason. i *heart* the decline of the US economy.

Hit an annual rate of 1.5 million in September. That compares with 900,000 last year from fewer than 800,000 in 2005. At the current rate, more than one million Americans will lose their homes to foreclosure, making this the worst housing recession since the Second World War.

Housing starts

Sank to a 14-year low of 1.19 million in September. Starts are a vital economic engine, creating jobs and growth as people stuff their homes with sofas and TVs. Starts peaked at 2.3 million in early 2006, and the decline will be a drag on the rest of the economy until the slide stops.

Mortgages

A quarter of the roughly 50 million U.S. home mortgages are subprime. That's seven times the number of high-risk mortgages there were in 2001. That means that many more marginal homeowners have mortgages, making it far more likely they'll wind up in default.

House prices

Fell 3.2 per cent in the second quarter. Prices are falling faster and more broadly than they have in decades, according to the closely watched Case-Shiller index.

In regard to inflation, in the USA during the past three years inflation has been soaring - but almost entirely in the housing sector. The fact that people are encouraged to see their houses as investments rather than as expenses doesn't mean that skyrocketing housing costs weren't inflationary. They were.

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008. As it has for the past 30 years, the official CPI will understate the real inflation rate. It was rigged under Reagan so that government entitlement programs indexed to the CPI would not increase at the true pace of inflation.

If Bush continues to shovel shit on the dollar right up to the end of his term in January 2009, the inflation rate could hit 15%-20% by 2010.

When Bush was elected in 2000, the federal budget was in surplus and the national debt was being paid down. Had this state of affairs continued, as projected, it would have led both to lower interest rates and a strong dollar, together. Instead, Bush submitted a series of enormous tax cuts to the Republican-controlled Congress and lobbied them through. Immediately, the CBO's projected budget surpluses turned to projected deficits for the next decade.

Bush also initiated a war of choice, not necessity, in Iraq. This war has already cost well over $700 billion. Yet, Bush insisted on making his tax cuts permanent. Overall, the national debt has increased under Bush by about $2 trillion in seven years. This represents a difference of about $3 trillion of debt from what was projected at the start of his first term.

Because, due to Bush's tax cuts and other policies, the Federal government was in a far weaker position to stimulate the economy when the recession started after 9/11, almost the entire stimulus was delivered via lower interest rates. Because these rate cuts were artificial, and not based on a stronger dollar, this stimulus not only inflated the current housing bubble, but it also undercut the dollar even more than the ballooning national debt did.

Now the dollar is at an all-time low against the euro and the canadian dollar. However, the incomes of the top 10% of American households have increased at a good clip, while the lower 50% of households have seen a decrease in income after inflation. This is largely thanks to Bush's shitty policies. I expect more of the same mismanagement until he is gone.

I remember the 1970s and early 80s quite well. Back then people couldn't belileve it, either. Bush has done a bangup job of recreating many of the same policy errors under Johnson and Nixon that led to raging stagflation back then, except the underlying economy is now weaker than it was in the 1970s and the oil shocks we are likely to get are not political, as when OPEC was formed, but structural.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

-- Aimless, Saturday, 20 October 2007 19:07 (14 minutes ago) Link

The coming of $100/barrel oil is not Bush's fault. It's yours and mine and everyone else's for using too damned much energy. I agree Bush could and should have done a lot more with policy to encourage energy efficiency, but there's little he could have done to stop oil's eventual rise to that price level.

Part of the pricing of oil represents the weakness of the dollar. This hurts the USA more than it does other countries. US citizens are paid in dollars and the US government collects revenue in dollars, so they are stuck. EU countries can use euros to buy increasingly cheap dollars, so they don't see the same rise in prices as we do. The weakness of the dollar is mainly Bush's fault.

apart from some student loans and binging on credit cards over a few years, i'm kind of debt phobic.

which has actually made me lose out over the past several years, i realize, since i pay for EVERYTHING with a debit/check card... i could have just paid that balance on a credit card with some rewards scheme and has some air miles or something

most of that guy's scenario is not really news to regular bigpicture/CR readers I don't think. But #5, the "we don't pay attention" thing, yeah, well, evidently the awareness campaign is underway, but hell if the big players are paying attention.

He also leaves out the approaching demographic catastrophe as millions of inexperienced thirtysomethings and even some late-twenties kids are forced to move into arguably tougher jobs that the boomers have been holding for two decades. Beyond the social security and healthcare costs associated with mass retirement, I don't really know if this generation has the work ethic and definitely not the rolodex to just start filling in and not fuck up royally. too busy updating their linkedin pages.

When you enter into a contract with a bank for a mortgage, both you and the bank assume that the property value will not plummet. The bank doesn't want you to default any more than you want to default. But if for whatever reason you need to sell your home, and you can't get what you owe on it, then you will owe the difference to the bank. And the bank knows that when that happens, you probably will not have enough assets to cover the difference.

Predatory-type loans (which seems like a nebulous description to me) typically compound the problem because they have higher transaction rates (points, etc.)

I see what you're saying -- and it's a fool's game to believe that Walmart and other low-wage employers would pay a nickel more if government assistance didn't exist -- but the argument I see generally isn't over that. It's over Walmart et al. paying so little on the one hand that their employees are forced to rely on government assistance; and on the other hand their CEOs and owners crying to Congress about their "high taxes" and the welfare state.

It's over Walmart et al. paying so little on the one hand that their employees are forced to rely on government assistance; and on the other hand their CEOs and owners crying to Congress about their "high taxes" and the welfare state.

I've skimmed a couple articles lately on the Earned Income Tax Credit as a few conservatives are now pushing this as a better way to help the folks who they say do work and need help rather than increasing the minimum wage (which they insist largely helps middle and upper class high schoolers working after school, and not the working poor and middle class trying to survive). But its not clear enough conservatives want to expand the use of the credit. In fact, that Republican Dave Camp tax reform package reduces the amount of folks eligible for the EITC

Also the first day at work after you watch an orientation video they tell you to snoop on any of your fellow employees who start talking about unions. Or at least they did when I worked there when I was 18 (10+ years ago).

allowing Walmart to employ people even full time without meeting their cost of living, with government forced to pick up the difference makes the current min wage law itself a subsidy (kinda analogizing to "tax expenditure" concept here)

Yes. As soon as possible. This is would help millions of working poor, not just WalMart employees. I'd say $10/hr. should be the lowest amount even considered as proper compensation for any paid work of any description.

Wow, the number of elisions (e.g. not mentioning that Douglas Holtz-Eakin was the head economic advisor for the McCain campaign and heads some right wing think tank), omissions (a single unlinked Texas A&M study that contradicts nearly all other available research on the minimum wage) and bad-faith logical fallacies (it's not the best way so let's not use it at all/it doesn't help everyone so we shouldn't help anyone) in that article are staggering.

Right, but that makes it sound like if you stopped subsidizing, the business model wouldn't work. Which is why the argument makes me a little uncomfortable. I support raising the minimum wage.

It does seem plausible that without government benefits Walmart would be forced to pay slightly higher wages. Same probably goes for other big companies that rely on minimum wage labor (such as the fast food industry). But it's hard to say because reducing government benefits would have lots of indirect effects on demand and such. In any case, the way I see it, that's not an argument for reducing benefits, but rather for raising the minimum wage.

Financial advisors have a vested interest in convincing as many people as possible that "good financial management" requires meeting a variety of difficult to meet goals through strategies that are more complicated than people would construct on their own. Basically, the hordes of financial 'advisors' out there are peddling watered down, simple-minded versions of how the wealthy manage much larger trusts and estates. In order to make enough work for the ever-increasing numbers of these parasites, these strategies are being pushed at people ever further down the income scale. It is an industry and they sell fear, uncertainty and doubt. Don't buy it.

I think the six months' savings things makes a lot of sense if you have a family. Maybe less so if you're single and can easily move to a cheaper rental or crash on a friend's couch or whatever. I agree that a lot of other stuff financial planner types tell you is just ludicrous and beyond imagination, like the amount you're supposed to save for your kids college, the amount you're supposed to save for retirement, etc.

Just having a savings account with as much money as you can wangle into it doesn't require a financial advisor to figure out. Stating flatly that it should contain "six months of living expenses" is more confusing than enlightening.

Very few people can tell you what "one month of living expenses" amounts to. I happen to keep detailed records of what we spend each month, going back to 2008, and the amounts vary so widely I'd have to massage the numbers quite a bit to come up with a number that even vaguely fits "six months of living expenses". As advice, this sounds simple, but as soon as you seriously try to put it to use, it becomes very, very nebulous and more likely to inspire fretting than guide action.

By way of contrast, saying "six months of your rent or mortgage payments" would at least allow a person to quickly and easily calculate a number so they can see what the goal is.

xp IDK, it seems kind of intuitive to me that "six months of living expenses" means six months of the things you couldn't or wouldn't want to cut even in an emergency -- food, rent/mortgage, basic utilities, etc.

This is based on the Census Department's Relative Poverty Measure (Table 4), which is "most commonly used in developed countries to measure poverty." The Economic Policy Institute uses the term "economically vulnerable." With this standard, 18 percent of Americans are below the poverty threshold and 32 percent are below twice the threshold, putting them in the low-income category.

The official poverty rate increased by 25 percent between 2000 and 2011. Seniors and children feel the greatest impact, with 55 percent of the elderly and almost 60 percent of children classified as poor or low-income under the relative poverty measure. Wider Opportunities for Women reports that "60 percent of women age 65 and older who live alone or live with a spouse have incomes insufficient to cover basic, daily expenses."

4. It's Much Worse for Black Families

Incredibly, while America's total wealth has risen from $12 trillion to $77 trillion in 25 years, the median net worth for black households has GONE DOWN over approximately the same time, from $7,150 to $6,446, adjusted for inflation. State of Working America reports that almost half of black children under the age of six are living in poverty.

captain obvious: "a very ugly blame game going on that’s directed — is orchestrated — by people who are doing very nicely at the top to turn the sort of great middle class that itself is feeling squeezed against people at the bottom"

I don't want most people to experience the misery of another bubble bursting but I feel like the post-recession gains in the economy have been accumulated by such a relatively small number of people that it wouldn't be as devastating.